Q:

How do you purchase land with a loan?

A:

Quick Answer

Take out a land loan using the land as collateral for the loan. Land loans are very different from home loans and mortgages. A land loan can be taken from the seller of the land, financial institutions and credit unions, among other sources.

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Full Answer

First, seek out the land that you wish to purchase, based on the goal that you have set for the land. Approach the sellers of the land to purchase it, and take your idea for the land to several sources to receive a land loan.

Land loans are risky, high-interest loans that you take when you want to purchase a piece of land with borrowed money. The lender takes the property and land as collateral; investing in land is a risky venture that has no cash inflow in the near term. Moreover, you must pay a higher down payment and interest rate for the loan due to the implicit risk involved in the purchase.

To take out a loan, seek financing from various sources. If you intend to start construction or usage of the land immediately, you can take short-term financing from the seller himself. On the other hand, if you are unsure of when you plan to begin to work with the land, then you can take a potential project to a large bank, financial institution or credit union, which can provide a land loan using the land as collateral.

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